Investments & Financial Planning

Preferred stock gives its shareholders certain privileges that make them senior to common shareholders.
Preferred stockholders are promissed a fixed periodic return which is stated as a dollar amount or a percentage.
Preferred stockholders are given preference over common shareholders with respect to distribution of earnings.

Marketable securities are short term debt instruments such as U.S. Treasury bills, commercial paper and negotiable certificates of deposit issued by financial institution, business, or government.

Securities exchanges are tangible institutions that act as secondary market in which outstanding securities are resold. Securities exchanges are called "stock markets", provide the marketplace in which firms can raise funds through the sale of new securities and purchasers of securities can maintain liquidity by being able to easily resell them when necessary.
Although called stock markets, bonds, preferred and common stock and other investment vehicles are all traded on theses exchanges.
The 2 types of security exchanges are the Organized Exchange and the Over the Counter Exchange. The most used organized exchanges are the (NYSE)New York Stock Exchange and the (AMEX)American Stock Exchange both located in New York City.
The New York stock exchange is also known as the Big Board. More than 2,000 common and preferred stocks are traded here. The New York Stock Exchange is the oldest in the United States. It was founded in 1792, and is the largest.
It is located on Wall Street in New York City. Other regional exchanges are the Midwest Stock Exchange in Chicogo and the Pacific Stock Exchange in San Francisco California.
Trading is carried out on the floor of the exchange through an auction process. The goal of stock trading is to fill buy orders at the lowest price and fill the sell orders at the highest price.

The bid price is the highest price offered by a dealer to purchase a given security. The ask price is the lowest price at which a dealer is willing to sell the security. The dealer adds securities to his or hers inventory by purchasing them at the bid price and sells securities from inventory at the ask price. A profit will occur from the difference between the bid and ask price.

Treasury notes are U.S. Treasury obligations with initial maturities of between 1 and 10 years, They pay interest at a stated rate semiannually. There is low risk of loss and usually a low return yield compared to other securities with similar maturities. They are usually issued in mimimum denominations of $1,000 or $5,000.

A share of Common stock is an ownership interest in a corporation. Investors can profit from common stock in that they may receive stock dividends issued by the corporation and they may benefit from an increase in the value of their shares. There are no guarantees that either of these benefits will occur.

A Bond is a security that represents a loan from the purchaser of the bond to the issuing organization. The Organization may be a private company or a federal, state or local government. Bondholders receive a specific amount of interest on a regular basis and the return of their loan principal at the end of a stated period. A Bond provides a fixed amount of income. Its value will increase if interest rates fall and decrease if interest rates rise.

Cash equivalent investments are often called reserves. These represent short term loans ti high quality borrowers such as the U>S> Government. Examples of cash equivalent securities are Treasury bills and money market mutual funds. Cash equivalent investments offer stability of principal and high liquidity. Cash equivalent securities can be turned into cash easily and quickly. Due to the fact that risk is relatively low, the return on these investments is also relatively low.

Risk in the most basic sense is the chance of financial loss. Inflation erodes your purchasing power. Inflation risk is the chance that your savings lose purchasing power due to the steady increase in the cost of goods and services over time. Inflation is is a major threat for investors with a long time horizon.
These investors may want a large portion of their investment portfolios invested in securities that historically have outpaced inflation by a decent margin. Generally these investments are in common stock or common stock mutual funds.